A payment gateway aggregator enables small and medium scale merchants to collect payments from their customers via digital transactions like the use of credit card, debit card, and Netbanking. They are also known as merchant aggregators and working with them does not require the merchant to open a separate merchant account with a bank. There is one single merchant account that belongs to the payment aggregator but handles multiple merchants.

How does a payment gateway work?

 To avail the services of a payment gateway service provider, the merchant needs to pay the setup fees, an annual maintenance fee and a TDR fee which means Transfer Development Right. This TDR is a percentage of the transaction value and varies from provider to provider. This is generally a viable option for bigger players as they have the money power for more significant investments.

However, with a payment aggregator, the effective TDR is much lower since they have lots of clients who tie-up with them for the payment gateway services. The setup fees of these aggregators are also much lower than the gateway service providers.

Also, a significant difference between both is that the former is a software where the merchant needs to work with an acquiring bank for payment processing in the backend. However, the latter is a company or a financial institution that is already associated with an acquiring bank, and hence individual merchant need not get involved in such formalities.

Advantages of using payment gateway aggregators are:-

  1. They are most beneficial to small-time businesses because the startup fees and other costs are much lower comparatively.
  2. The process of installation and beginning work is quick. Hence the merchant can gain access to the world of online trade without much ado and instantly.
  3. Work-related approvals come in fast.

There are drawbacks too – since aggregators handle some merchants, any irregular activity on the part of the merchant can lead to freezing his account and that too without notice. There are limits to the volume of transaction that can be processed for each merchant; aggregators are also known to delay dispersing the collected money to the merchant’s account. People can use these platforms for making any payment transaction knowing that their payment is safely going to be transacted and reach the intended recipient’s account within some time.

Payment gateways on the other hand help save time, help in controlling expenses and also help counter attacks effectively from cybercriminals. They have user-friendly features, and typically the service is not too expensive for a well-to-do business to afford.

The portal is totally safe and secure and they are highly dependent on internet connectivity and there is a cap on the number of transactions that can be carried out per day and the amount that is credited to the merchant account. The gateway provider makes sure that there is no nefarious activity by cybercriminals and as such, they take enough safety measures and are not equipped with powerful anti-fraud mechanisms.

All businesses need to consider these points before choosing between the two.


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